Phoenix IT survives EDS takeover at DWP

Phoenix IT has emerged from contract negotiations with EDS Global Field Services to supply desktop maintenance and support at Department of Work and Pension with an £8m plum.

That's what the Northampton-based computer services firm reckons the volume-prices gig will be worth this year. Unfortunately, the deal used to be worth £10.5m a year for Phoenix IT when BT was its lead contractor at the DWP, Kate Hanaghan of the analyst firm Ovum Holway notes.

On the upside, Phoenix now has a five-year contract for the DWP, as opposed to the previous terms of 12-18 months. Also Phoenix IT will also earn around £2m a year for its part in the networking element of the contract, run by BT, says Hanaghan.

However, price cuts for some activities are built-in to future years. And the DWP is expected to kick off a technology refresh in 2007, which will also mean even lower revenues next year. Hanaghan estimates the value of the contract will drop over the years to around £5m annually.

Phoenix has, she says, been "working hard over the past six months to improve service delivery methodologies in order to bring costs down ahead of this anticipated takeover by EDS. This should provide a cushion as it takes on this less profitable arrangement." ®